Following hot in the heels of the successful Irish benchmark sovereign issuance yesterday (€3.75bn ten year bond maturing in March 2024 at mid-swaps plus 140bps), BoI is expected to be in the market today and has mandated a number of investment banks to raise a Euro denominated five year senior unsecured transaction (expected to be rated Ba3/BB+). <p>

BoI last issued a senior unsecured bond in May 2013 raising €500m (three year tenor) at mid-swaps plus 220bps (coupon of 2.75%). That transaction was 2.5x over-subscribed with total orders of €1.25bn from 120 investors. More recently, AIB raised €500m of senior unsecured three year term funding in November at midswaps plus 235bps (significantly over-subscribed with total orders of €3.6bn). <p>

A new senior deal will help BoI to pre-fund future scheduled term redemptions of c. €1.6bn and €5.7bn over the course of 2014 and 2015 respectively and improve Net Stable Funding Ratios (NSFR). The bank is likely use the majority of the new issuance proceeds to reduce residual ECB borrowings (€9bn at June 2013) or to fund new lending. In relation to the latter, we noted earlier this week that we expect BoI to be particularly involved in the IBRC liquidation over coming months, with any refinancing of portfolios boosting average interest earning assets and going some way to help achieve its medium term loan volume target of €90bn (dipped below €87bn at Q3 2013 per its IMS).
<p><h5>Ciaran Callaghan</h5>


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